After a disappointingly-weak Q1, the economy looks to have made a pretty slow start to Q2. Admittedly, the measly 0.1% expansion in GDP in Q1 was partly due to weather effects. However, there are signs that the economy has lost some underlying momentum. After all, the manufacturing sector, which should be relatively isolated from the weather effects, has slowed. And the construction sector has been beleaguered for the best part of a year now. Moreover, the PMI surveys for April did not reveal a meaningful rebound, and suggest that quarterly GDP growth only picked up to around 0.3% at the start of Q2. Of course, the PMIs don’t include the retail sector, which should bounce back in Q2. And the outlook for consumer spending is brighter now that real wages are on the rise. It’s worth remembering, too, that the early GDP figures are prone to significant revisions. Nonetheless, the risks to our near-term forecast now appear skewed to the downside.
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